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What I wish I'd known about money when I was young

28 January 2018 - 00:02
ANGELIQUE ARDÉ

Unless your parents were masters of their personal finances and invested time and energy imparting their knowledge to you, you've probably learnt to manage your money by trial and error. Experience can be a brutal teacher.

What if you could glean money lessons from people at the top of their game when it comes to managing money? If you've just started your working life, you can set yourself up to succeed by establishing some good money habits now.

Delphine Govender, the chief investment officer at Perpetua, says she wishes she had truly understood the "almost miraculous" power of compounding when she was younger - especially investing in good-quality businesses and then letting time do the rest.

Delphine Govender, chief investment officer at Perpetua.

"My advice to my younger self would be: take time to decide what to invest in, but once you do invest, just let it be. The outcome will almost always be a pleasant, even life-changing, 'surprise'!"

Govender says she learnt from her parents to live within her means.

"However, my parents' financial conservatism was a constraint of sorts, as excessive risk aversion can be an opportunity lost over time.

"Had I been less risk-averse with money that I could afford to lose, I would have invested earlier and more in companies that I believed would be growing businesses over time."

Craig Gradidge, a director at Gradidge-Mahura Investments and a certified financial planner, says he grew up with the idea that debt was a bad thing.

"As a result, I developed a phobia for debt. But, if used properly, debt - or gearing - can be a powerful tool to help create long-term wealth.

"Too often debt is vilified. I think people need to learn how to use it, and to understand it better. The use of debt to fund consumption is bad. But the use of debt to fund the purchasing of growth (and income-generating) assets can be a powerful wealth creator over time."

Tinyiko Ngwenya, an economist at Old Mutual Investment Group, wishes she had sought financial advice earlier in her working life.

"People are very wary of advice - for fear of it not being impartial - but that leaves you exposed.

"Seek advice from a qualified financial planner at the beginning of your career. A financial plan forces you to think about your long-term financial goals," she says.

"I also wish I'd been encouraged to save more for retirement. When you start working, you get told 'This is your contribution to the company-sponsored pension fund and this is the company's contribution', and it seems like such a lot.

"You think it's going to be enough. You could retire at 60 and yet live to 100. Saving more now is a small sacrifice for a big benefit later. And there are big tax incentives."

Olano Makhubela, deputy executive officer of retirement funds at the Financial Services Board, says he developed the habit of saving from childhood, thanks to his parents opening a bank account for him.

"My best money tip is automate your saving. This means my savings come off my salary the day I receive it.

"I then spend what's left. I've been doing this since my first job. Automation does the disciplining for me!"

Marc Sevitz, a director and the chief financial officer of TaxTim, says having to work part-time to pay for his university fees while studying was a great money lesson.

"My mom was a single working parent and working was the only way to get by. My grandmother advised saving a portion of any money earned.

"She never suggested how much, but felt it important to put something away before spending so that you never have to look around at the end of each month for money to save.

"You have to 'trick' yourself into thinking you have less to spend, otherwise a form of 'expense creep' will happen and each month you will delay saving.

"On the day my salary is paid, a portion of it goes into my investment account and the rest is left for budgeted expenses."

Noluntu Bam, the ombud for financial services providers, says she wishes she had understood the real cost of credit and the importance of saving.

"It's not how much you have, but what you do with it that counts. And you don't have to earn a specific salary to have financial freedom, just the discipline to budget, save for a rainy day, avoid trying to keep up with the people around you, and to resist buying on credit. Rather save until you can afford what you want."

Shirley Zinn, professor at the University of Pretoria.

Shirley Zinn, an extraordinary professor at the University of Pretoria's faculty of economics and management sciences, says the best money advice she got was from her parents who taught her a good work ethic and that education was the only liberation from poverty.

"I was encouraged to find a weekend job and to value my earnings. From the age of 13 I worked at a supermarket packing shelves and working on the tills.

"I took pride in my small earnings and developed a healthy relationship with money that would be a solid foundation for the rest of my life."

Zinn's top money tip is: save from as early an age as possible.

"Learn the value of cumulative savings. Don't let a bit of extra cash burn a hole in your pocket and don't try to impress others by spending money you don't have."

Nic Smit, an actuary at FMI and the author of The Opinionated Actuary blog, says if there was one thing he could say to his 20-year-old self, it would be: "The maximum amount a bank is willing to lend you to finance a property is not a target.

"Don't allow yourself to be swayed by how a property makes you feel; let the numbers decide for you." Smit lost money on his first house which he owned for five years - owing to the cost of renovating and what he paid for the house.